Correlation Between Cisco Systems and MEI Pharma
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and MEI Pharma at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Cisco Systems and MEI Pharma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and MEI Pharma, you can compare the effects of market volatilities on Cisco Systems and MEI Pharma and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Cisco Systems with a short position of MEI Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and MEI Pharma.
Diversification Opportunities for Cisco Systems and MEI Pharma
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cisco and MEI is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and MEI Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEI Pharma and Cisco Systems is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Cisco Systems are associated (or correlated) with MEI Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MEI Pharma has no effect on the direction of Cisco Systems i.e., Cisco Systems and MEI Pharma go up and down completely randomly.
Pair Corralation between Cisco Systems and MEI Pharma
Given the investment horizon of 90 days Cisco Systems is expected to generate 0.44 times more return on investment than MEI Pharma. However, Cisco Systems is 2.25 times less risky than MEI Pharma. It trades about 0.19 of its potential returns per unit of risk. MEI Pharma is currently generating about -0.03 per unit of risk. If you would invest 4,618 in Cisco Systems on October 22, 2024 and sell it today you would earn a total of 1,405 from holding Cisco Systems or generate 30.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cisco Systems vs. MEI Pharma
Performance |
| Timeline |
| Cisco Systems |
| MEI Pharma |
Cisco Systems and MEI Pharma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and MEI Pharma
The main advantage of trading using opposite Cisco Systems and MEI Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, MEI Pharma can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in MEI Pharma will offset losses from the drop in MEI Pharma's long position.| Cisco Systems vs. Juniper Networks | Cisco Systems vs. Nokia Corp ADR | Cisco Systems vs. Motorola Solutions | Cisco Systems vs. Ciena Corp |
| MEI Pharma vs. Kezar Life Sciences | MEI Pharma vs. Vincerx Pharma | MEI Pharma vs. Avenue Therapeutics | MEI Pharma vs. Assembly Biosciences |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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